Stryker Corporation SYK delivered fourth-quarter 2018 adjusted earnings per share (EPS) of $2.18, beating the Zacks Consensus Estimate by 1.4%. Earnings improved 11.2% year over year and were at the high end of the company’s guidance.
The Michigan-based medical device company reported revenues of $3.80 billion, which were well ahead of the Zacks Consensus Estimate of $3.73 billion. Revenues increased 9.4% on a year-over-year basis and 11.3% at constant currency (cc).
Excluding ASC 606, revenues shot up 10.1%. Organically, sales grew 8.6% in the reported quarter.
Meanwhile, over the past year, the Zacks Rank #3 (Hold) stock slipped 4.4% compared with the industry’s 6.8% and the S&P 500 index’s 6.3% declines.
2018 at a Glance
Full-year EPS came in at $7.31, beating the Zacks Consensus Estimate by 0.4%. EPS improved 12.6% from 2017.
On a full-year basis, revenues totaled $13.60 billion edging past the Zacks Consensus Estimate of $13.54 billion. Revenues rose 9.3% on a year-over-year basis and 9.8% at cc. Excluding ASC 606, revenues ticked up 10.2%. Organically, sales grew 7.9%.
Stryker reports in three segments — Orthopaedic, MedSurg and Neurotechnology & Spine.
Full-year Orthopaedic sales grossed $5 billion (36.7% of net sales). MedSurg revenues totaled $6.04 billion (44.4%) while Neurotechnology & Spine revenues grossed $2.57 billion (18.9%).
Stryker Corporation Price, Consensus and EPS Surprise
Stryker Corporation Price, Consensus and EPS Surprise | Stryker Corporation Quote
Revenues by Geography
Revenues in United States came in at $2.77 billion, up 10.1% year over year. International sales rose 7.3% to $1.03 billion.
U.S. organic sales growth was 8% and international organic sales delivered double-digit gains powered by performances in emerging markets and Europe. In fact, full-year growth in South Pacific, Japan and Canada was higher than U.S. growth.
Segmental Analysis
Orthopaedic: In the quarter under review, revenues in the segment totaled $1.38 billion, up 5.4% year over year. The segment’s revenues grew 7% at cc.
Per management, the segment saw organic growth of 7% led by Trauma and Extremities. The company sustains momentum in Mako with a 30% year-over-year rise in robot utilization.
MedSurg: This segment reported sales of $1.72 billion, up 8.9% year over year. Sales at the segment increased 11.1% at cc. Per management, the segment grew 10% organically in the quarter, led by strong Endoscopy, Instruments and Medical performances.
Neurotechnology & Spine: Sales in the segment grossed $700 million, up 19.5% year over year and 21.4% at cc. Organically, the segment saw 8.4% growth Per management, the upside was driven by K2M acquisition and continued strong demand in Europe, China and Japan.
Margins
In the fourth quarter, gross profit totaled $2.46 billion, up 9.6% from the year-ago quarter. Adjusted gross margin was 65.6%, down 80 basis points (bps).
Operating income totaled $698 million, down 2.2% from the prior-year quarter. Adjusted operating margin was 27.5%, up 50 bps.
2019 Outlook
Stryker expects 2019 organic net sales growth in the range of 6.5-7.5%.
On a full-year basis, adjusted EPS is expected in the band of $8.00 to $8.20. The Zacks Consensus Estimate is pegged at $8.02, within the guided range.
For the first quarter of 2019, adjusted EPS is anticipated within $1.80 and $1.85. The Zacks Consensus Estimate stands at $1.84, within the projected range.
Wrapping Up
Stryker exited the fourth quarter of 2018 on a solid note, with earnings and revenues surpassing the consensus mark. The company continues to gain from its core MedSurg unit which put up a solid show in the quarter. Additionally, strength in flagship Mako platform has also persistently favored the company. Management is optimistic about the recent K2M acquisition which drove the core Neurotechnology & Spine unit in the fourth quarter. Solid international growth also buoys optimism. Expansion in operating margin is a positive while a strong outlook for 2019 is indicative of brighter prospects.
On the flip side, contraction in gross margin raises concern. Additionally, fourth-quarter revenues were impacted by unfavorable foreign currency movement. Pricing pressure also continues to plague Stryker. Stiff competition in the MedTech space is likely to mar prospects.
Earnings of Other MedTech Majors at a Glance
Some better-ranked MedTech stocks which posted solid results this earnings season are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corporation CNMD.
Varian’s fiscal first-quarter adjusted EPS of $1.06 were in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).
AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents beat the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, surpassing the consensus estimate by 2.9%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CONMED’s fourth-quarter adjusted EPS of 73 cents met the Zacks Consensus Estimate. Revenues of $242.4 million surpassed the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank #2.
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